What are Carve-Outs?

1. What are Carve-Outs? Carve-outs were developed to provide the opportunity to establish an improved benefit delivery system for injured workers and to encourage labor and management to collaborate toward this end. Carve-outs also provide an alternative to the dispute resolution procedures in the state workers’ compensation system.

2. How Were Carve-Outs Established? Carve-outs were established by workers’ compensation reform legislation in California. SB 983 in 1993. AB 749 in 2002. SB 228 in 2003. SB 899 in 2004.

3. Carve-Outs:Legislation in California Key Legislation: 1993 – SB 983 (New LCS 3201.5). Permitted employers and employees in the construction and related industries to engage in collective bargaining for alternative worker's compensation procedures. 2002 – AB 749 (New LCS 3201.7). Permitted carve-outs in the aerospace and timber industries.

4. Carve-Outs:Recent Legislation in California 2003 – SB 228 (LCS 3201.7). Repealed AB 749 and provided for carve-outs in any unionized industry. 2004 – SB 899 (Amended LCSS 3201.5 and 3201.7). Provides that employer and union may negotiate any aspect of delivery of medical benefits and disability compensation if employees are eligible for group health and non-occupational disability benefits.

5. Carve-Outs:5 Key Benefits for Employers and Unions Improves safety programs and fewer injury and illness claims. Provides effective medical delivery and improved quality of medical care at reduced rates and provides the ability to select qualified medical evaluators (QME’s). Achieves cost savings for employers through fewer claims, fewer disputes and discounts from insurers. Improves collaboration between unions and employers and provides the opportunity for continuous improvement by renegotiating the terms of the carve-out as needed. Increases satisfaction of all parties.

6. Participation in Carve-Outs Participation in carve-outs has increased steadily: From 242 Employers in 1995 to 512 in 2002. From 3,450 Employees (FTE) in 1995 to 14,261 in 2002. From $157.6 million in payroll in 1995 to $634.2 million in 2002.

7. Carve-Outs:Key Components The Potential components of a carve-out are: Alternative dispute resolution process. Agreed list of medical providers, qualified medical evaluators, and agreed medical evaluators. Joint-labor management safety committee. Return-to-work program offering a light-duty modified job or alternative job. Retraining program that includes an agreed list of providers.

8. Carve-Outs:Alternative Dispute Resolution The Alternative Dispute Resolution (ADR) process in a carve-out generally includes 3 stages: Ombudsmen: In the initial stage, the ombudsmen , a neutral third party, can provide information to injured workers and attempt to avert or resolve disputes. Mediation: If dispute resolution is not successful in the first stage, the process may move to a second stage or mediation, in which a mediator, a neutral third party, assists in resolving the conflict. Arbitration: If dispute resolution is not successful in the second stage, the dispute may move to the third stage, or arbitration. In this stage, both sides have an opportunity to present witnesses and evidence and to engage in cross-examination. *If either party is not satisfied with the decision attained through arbitration the employer or the employee may appeal to the WCAB Reconsideration Unit and, ultimately to the State Court of Appeal.

9. The Key Participants in a Carve-Out: Roles and Responsibilities Unions, workers, employers, ombudsmen, mediators and arbitrators all play critical roles in a carve-out to ensure that everyone’s best interest are served.

10. The Key Participants in a Carve-Out: Roles and Responsibilities Unions The key areas that the union may focus on include: Medical services and choice of physician. Resolution of medical and legal disputes. Preservation of wages and benefits. Return to work (includes modified duty or alternative work) or retraining. Protection against job discrimination. Disability benefits.

11. The Key Participants in a Carve-Out: Roles and Responsibilities Employers The key responsibilities include: Maintain the proper workers’ compensation insurance coverage. Develop a joint labor-management contract. Develop and implement a joint labor-management safety program.

12. The Key Participants in a Carve-Out: Roles and Responsibilities Workers The key responsibilities are: Learn about and participate in the employer’s safety program. Participate in a alternative dispute resolution process to resolve worker’s compensation disputes. Report claims as soon as possible by contacting the Ombudsman

13. The Key Participants in a Carve-Out: Roles and Responsibilities Ombudsman The key responsibilities include: Act as a neutral party to provide information and resolve disputes. Maintain confidentiality. Strive for objectivity and impartiality in order to consider the concerns of all parties known to be involved in a dispute. Develop a range of options to resolve problems and facilitate discussion.

14. The Key Participants in a Carve-Out: Roles and Responsibilities Mediators The key responsibilities include: Facilitate self determination: The mediation process relies upon the ability of the parties to reach a voluntary, uncoerced agreement. Ensure mediator impartiality. Maintain confidentiality.

15. The Key Participants in a Carve-Out: Roles and Responsibilities Arbitrators The key responsibilities include: Be knowledgeable in the workers’ compensation dispute process. Appoint an authorized health care professional to assist in the resolution of any medical issue. Render a decision (award) within a specified number of days from the completion of the proceedings.

16. The Appeals Process in a Carve-Out The Reconsideration Unit of the Workers’ Compensation Appeals Board (WCAB): If either party is not satisfied with the decision of an arbitrator, then the workers of the employer may appeal to the Reconsideration Unit of the WCAB to review the decision. The Reconsideration Unit would review the decision in the same manner as it would review a decision of a state workers’ compensation judge.

17. The Appeals Process in a Carve-Out If either party is not satisfied with the decision of the Workers’ Compensation Appeals Board (WCAB), then the worker or the employer may appeal to the State court of appeal.

18. Carve-Outs:Construction vs. Other Unionized Industries Initiation of Agreement Construction - Jointly initiated by labor and management. All Other Industries - Union initiates with filing a petition with the AD. Labor-Management Agreement Construction - Negotiated with the collective bargaining agreement. All Other Industries - Negotiated separately from the collective bargaining agreement. Union Qualification Construction - Recognized or certified exclusive bargaining representatives of the EEs or the ER (for other qualifications, see CCR Section 10200) All Other Industries - Recognized or certified exclusive bargaining representatives of the EEs or the ER (for other qualifications, see CCR Section 10200) -

19. Carve-Outs:Construction vs. Other Unionized Industries (Cont’d) Employer Qualifications Construction – The ER must have an annual WC premium of at least $250.000 or the self-insured equivalent; groups of ERs-2 million or the self-insured equivalent. All Other Industries – The ER must have an annual WC premium of at least $50.000 or the self-insured equivalent; groups of ERs $500.000 or the self-insured equivalent Attorney Representation Construction – The right to representation by counsel may be negotiated as part of labor-management agreement. All Other Industries – The labor-management agreement must not deny the right of any EE to representation by counsel at all stages of ADR.

20. Steps to Create a Carve-Out in Unionized Industries Union files a petition with AD of the DWC to enter into a carve-out. AD checks that petition is complete. AD verifies petitioner’s status as the exclusive bargaining agent. AD issues a letter advising the union and the employer of eligibility to enter into negotiation for a period not to exceed one year for the purpose of reaching agreement on the carve-out. Union and employer negotiate a carve-out agreement. Union and employer submit application to the AD. Employer submits a copy of the collective bargaining agreement with approximate number of employees covered under the agreement.

21. Steps to Create a Carve-Out in Unionized Industries Employer submits evidence of a valid and active license where license is required to do business. Employer submits a statement that nothing invalidates the collective bargaining agreement. Employer submits name, address, and phone number of contact person's). Employer submits evidence of an insurance program large enough to meet statutory requirements. Union submits LM-2 or LM-3. Union submits name, address and phone number oc contact person's). AD checks that the application is complete.